Agricultural Growth Diagnostics: Identifying the Binding Constraints and Policy Remedies for Bihar, India

Abstract: Agriculture plays a significant role in economic development of the underdeveloped region. Multiple factors influence the performance of agricultural sector but a few of these have a strong bearing on its growth. We develop a growth diagnostics framework for agricultural sector in Bihar located in eastern India to identify the most binding constraints. Our results show that poor functioning of agricultural markets and low level of crop diversification are the important reasons for lower agricultural growth in Bihar. Rise in the level of instability in the prices of agricultural produces indicates a weak price transmission across the markets even after repealing the agricultural produce market committee act. Poor market linkages and non-functioning producer collectives at village level affect the farmers motivation for undertaking crop diversification. Our policy suggestions include state provision of basic market infrastructure to attract private investment in agricultural marketing, strengthening the farmer producer organisations, and a comprehensive policy on crop diversification.